Trouble Emerging

The Chinese stock market continues to fall and the decline is accelerating. In the first six months of 2018, the Shanghai Stock Exchange Composite Index declined -23% and is now down -46% from the highs set in 2015. The Chinese renminbi has fallen sharply in recent months and may be causing emerging market equity investors some concern. However, a more fundamental reason is likely the cause for the increased risk aversion. Debt as a percentage of GDP has exploded in China over the last ten years, rising from 160% of GDP in 2008 to 266% of GDP in 2017 according to Bloomberg Economics estimates. Many suggest China is on an unsustainable path. The stock market is starting to reflect these greater risks.

 
 

China makes up over 30% of the Emerging Markets Equities Index (EEM), so Chinese equities need to stabilize before EEM has any chance of resuming its uptrend. A reversal of the recent strength of USD would help, but for now, the Active Asset Allocator continues to hold a 30% allocation to cash in advance of the next opportunity to invest.

At Secure Investments, I advise individual clients on their pension and non-pension fund investment portfolios. To learn more about my Active Asset Allocator and Gold Trader  investment strategies, please get in touch at brian@secureinvestments.ie or 086 821 5911. If you are reading this via LinkedIn, why not visit Secure Investments and subscribe to get exclusive content for free. No spam, ever. Just great stuff.

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